Acer 2007 Annual Report Download - page 101

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98
(c) For the years ended December 31, 2006 and 2007, the Consolidated Companies’
evaluation loss on nancial assets and liabilities using an assessment method amounted to
NT$1,343,916 and NT$121,332, respectively.
(d) Disclosure of nancial risks
(i) Market risk
Mutual funds and publicly traded stocks were recorded by the Consolidated Companies
as “available-for-sale nancial assets” and were evaluated by fair value. Therefore, the
Consolidated Companies were exposed to the risk of price uctuation in the securities
market.
The Consolidated Companies engaged in purchase and sale transactions with the
functional currency of US dollars and Euros, respectively. Hence, the Consolidated
Companies entered into foreign currency forward contracts and foreign currency options
to hedge exchange risk resulting from assets and liabilities denominated in foreign
currency and cash ows resulting from anticipated transactions in foreign currency. The
lengths and amounts of the foreign exchange forward contracts and foreign currency
options were in line with the settlement date and anticipated cash outflows of the
Consolidated Companies’ foreign currency assets and liabilities. The gain or loss from
exchange rate fluctuation of hedging derivatives was offset by that from the hedged
assets or liabilities. Therefore, the market risk related to the changes in exchange rates
was not considered signicant.
(ii) Credit risk
The Consolidated Companies’ credit risk is mainly from potential breach of contract by
the counter-party associated with cash, equity investment, and derivative transactions.
In order to control its exposure to the credit risk of each financial institution, the
Consolidated Companies usually deposit cash with various nancial institutions and hold
equity investments in the form of mutual funds and stocks issued by companies with high
credit quality. As a result, the concentration of credit risks related to the Consolidated
Companies’ cash and equity investments is not considered significant. Furthermore,
the banks undertaking the derivative transactions are reputable financial institutions;
therefore, the Consolidated Companies’ exposure related to the potential default by those
counter-parties is not considered signicant.
The Consolidated Companies primarily sell and market the Acer-branded IT products to
a large number of customers in different geographic areas. As a result, the Consolidated
Companies have no significant concentrations of credit risk, and in order to lower the
credit risk, the Consolidated Companies continuously evaluate the credit quality of their